Hurricanes focus attention on issues of flood insurance and how Flood Re has improved the situation in the UK

September 27th 2017

Dramatic news images of the effects of hurricanes Harvey and Irma in the United States have reminded many of the misery brought about by natural catastrophes. According to Lloyd’s it has also highlighted the problems of inadequate flood insurance in America. While we in the UK have not had to deal with Harvey or Irma we are only too familiar with high levels of rainfall, concerns about flood prevention strategies and, until recently, the problems of inadequate flood insurance. Here, under the Flood Re scheme, the UK has made significant strides towards flood insurance being generally and widely available.

Until recently, the problem was that some people simply could not get flood insurance at all. Home owners whose property stood in areas of recognised high flood risk were unlikely to be given that option. But in 2015 the Flood Re scheme was launched in the UK. Flood Re is designed to provide insurance options for home owners in high flood risk areas. It means that many of those previously locked out of the insurance market now have access to more affordable cover.

Flood Re is a publicly accountable, not-for-profit reinsurance fund owned and managed by the insurance industry. Its purpose is to ensure that those home owners in the highest flood risk areas of the country have access to affordable flood cover. This is sold via a standard household policy, with the flood risk element passed to Flood Re at the insurer’s discretion.

Funded through an industry-wide levy which currently raises in the region of £180 million per annum, some 41 insurers are now supporting the Flood Re scheme. Together they account for over 90 per cent of the home insurance market, a huge increase on the initial 16 companies registered at its commencement in April 2016.

To date insurance for small businesses has not been included in the Flood Re scheme as it is restricted to home owners. Farm and estate policies are classified as commercial risks and are therefore not eligible to participate in Flood Re.

In December 2016 the British Insurance Brokers’ Association (BIBA) announced a new commercial product aimed at small and medium sized businesses in high risk areas. Based on the Landmark computer mapping system it offers solutions at varying levels of risk. Although not as comprehensive as Flood Re, the new scheme may provide cover to some small businesses, including farm and estate risks, struggling to obtain flood insurance.